New High Has Stock Watchers in O.C. Mixed : Reaction: Some say the Dow’s record close won’t hold, but others argue it will boost confidence. As for the effect on local issues--only time will tell.
A lot of brokers and investors hope he’s wrong, but market watcher Dan Sullivan doesn’t think Thursday’s record-breaking stock market will hold up very long.
Sullivan, who publishes the respected Chartist newsletter that tracks Wall Street trends, said he sees the Dow Jones Industrial Average closing at 4,003.33 as “the last gasp of a bull market,” and not the beginning of a new boom.
“I’m not impressed,” the Huntington Beach analyst said of the record close.
Neither is Marc Leitner, a Corona physician who considers himself an avid and knowledgeable stock investor.
But Leitner, chief of neonatal intensive care at Parkview Community Hospital in Riverside, doesn’t agree with Sullivan that the market is headed for a fall. “When the experts all agree, and most of them have been predicting disaster, I just remember that most of the time they are proven wrong,” Leitner said.
While it is a key indicator of major industrial companies’ stock performance, the Dow is not the only stock index, and many of the others have not risen with the same speed, he said.
The stock of 37 of the 100 largest publicly traded companies in Orange County rose with the market Thursday, but the price per share for 36 of the companies fell and the rest remained flat. For their investors the day was no reason for a party.
Local stock watchers such as Jeffrey Kilpatrick, president of Newport Securities Inc., a brokerage that specializes in Orange County-based companies, say that the shares of smaller, local businesses usually trail major market activity--rising or falling days, even weeks after highly publicized events like Thursday’s record Dow close.
Leitner said he isn’t rushing out to gobble up more shares in the face of a rising market “because I buy (because of) the company, not the stock price. I look for stocks of companies that have growth potential and a track record. If the market finishes above 4,000 then that’s good psychologically, but it’s not what affects my market decisions.”
What drove Thursday’s surge past the 4,000 mark--and what has driven most big spurts in the Dow average--is bulk purchasing by mutual fund managers, not sales to individual investors, said Brad Weddon, manager of retail trading at Texas Capital Securities in Newport Beach.
“It is more of an attitudinal thing” to see the market go past 4,000, he said. “It gives people a warm feeling, but most investors are smart enough to know that one day does not a market make.”
But in Texas Capital’s institutional services unit, where four desk-bound traders handle deals for mutual fund managers and pension funds, Thursday was a busy day, Weddon said.
“The mutual fund guys are flush with cash and their customers aren’t liquidating, so their reserves are way up and they’re out there buying” stock, he said.
The average individual investor “makes portfolio changes only when appropriate” for a particular investment strategy, said Mike Danzi, managing director of Danzi Capital Group in Newport Beach. “It is the institutions that drive a lot of the market and the market’s volatility. Retail investors are not as apt as an institutional manger to buy or sell based on announcements like the Federal Reserve saying it might not be raising interest rates again.”
Across Orange County, brokers reported a lot of interest from customers calling to find out “whether this is real,” but not a whole lot of actual trading, said Jim Tarzynski, a broker with Crowell, Weedon & Co.’s Laguna Hills office.
“As far as my customers are concerned,” he said, “they are just sitting back and enjoying (the good news) right now.” Unlike Sullivan, Tarzynski believes the new high will help a lot of investors shake the uncertainties that have caused them to hold off on stock buying in the past few months.
“A lot of people have been sitting on the sidelines, and this could bring them back into the market,” he said.
It also could touch off some of that investor paranoia that always accompanies a quick jump in prices, said Kilpatrick, the Costa Mesa brokerage chief.
“Many investors look at a big increase and see things going up, but a lot also start feeling pretty quickly that maybe it means that this is as high as it will go and prices will start falling,” he said.
That’s what Sullivan believes will happen, and that’s what he’s been telling his nearly 10,000 newsletter clients for several months now.
“The majority of advisers have been bearish for some time,” said Sullivan, adding that the market’s climb “is kind of like the California real estate situation a few years ago. It keeps going up despite the signs.”
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Moving With the Market
Among the 100 largest publicly traded corporations in Orange County, nearly four in 10 increased in price Thursday as the Dow Jones Industrial Average crossed the 4,000 mark. Here are Thursday’s top five local gainers and losers and how their shares have fared over the past 14 months:
1993 1994 Thursday Daily close* close* close change GAINERS Cerplex Group Inc. NA** $10.75 $7.63 +8.9% SC Bancorp $5.38 4.69 5.00 +8.1 Interpore Intl. 7.25 7.75 8.00 +6.7 Homedco 30.75 37.63 42.00 +5.0 Emulex Corp. 12.50 13.50 15.00 +4.3 LOSERS Tokos Medical $5.25 $6.50 $6.00 -15.8% Pacific Sunwear 8.25 15.50 11.50 -14.8 Bridgford Foods 9.25 10.00 9.50 -11.6 National Education 6.25 4.13 3.13 -10.7 Cimco 7.25 5.00 4.50 -10.0
* On last trading day of year
** Company went public April 8, 1994, when its stock closed at $12
Source: Newport Securities, Dow Jones; Researched by VAL TKACH / Los Angeles Times
